It’s Earnings Season!

Last week saw the start of earnings season for the fourth quarter of 2008, and this is likely to be one earnings season everyone hopes passes quickly.

The banking sector was in the spotlight all week.  Citigroup reported an $8.29 Billion loss, completing its worst year ever since its inception in 1812.  Nice.   Bank of America also lost $1.79 Billion in the fourth quarter, making 2008 the bank’s first yearly loss in 17 years. It wasn’t just limited to the US either, the news extended overseas as Deutsche Bank, which is Germany’s largest bank, warned of a fourth-quarter loss of $6.3 Billion.

Some Diamonds In The Ruff

JP Morgan Chase managed to surprise the market with an earnings report that beat expectations!  In addition, Bank of America received a lifeline of $138 Billion from the government’s $700 Billion rescue fund to help absorb their purchase of Merrill Lynch.

Inflation Fell

The Consumer Price Index for 2008 was reported the lowest since 1954.  This definitely indicated that inflation is definitely not a threat at this time. The chart below shows how consumer inflation has behaved over the past ten years. The blue line with dots shows overall inflation rates, while the black line with crosses shows the “core” inflation.  Core inflation removes the volatile food and energy costs. It’s interesting to see how the blue dotted line drops sharply on the far right side of the chart, showing the impact of lower oil prices on overall inflation.

Specifically, What Did Those Reports Say?

Each week, I put up an economic calendar of news coming out that following week.   Here’s the what actually happened with those reports last week:

What Impacts Mortgage Rates?

If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates.  There are normally two major things that impact the direction:

1. Economic News.  (Like the calendar above).
2. International News. (major events, pending legislation, war related news, etc).
3. Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).

What Are Rates Based On?

It’s been mentioned before, but as a common reminder – mortgage rates are only based on one thing. Mortgage Backed Securities (MBS).  The only way you have access to these is through live bond quotes.

Looking For Mortgage Rates?

If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote.  Each scenario is different (there are 27 different factors a mortgage rate is determined by).  If you or someone you currently know are looking for a mortgage, I’m here to help!

Information without obligation.  That’s my policy.  If you like what you hear, my team would love to help!

(Image Kudos: USA Today)

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